Ahmad is a woodworker, specialized on production of weired looking coffe tables.

Question

Ahmad is a woodworker, specialized on production of weired looking coffe tables. Unfortunately, when he was attending his woodworking school 55 years ago, he did not pay attention in the class "Woddworking-Econ 310: Microeconomics for woodwaker", and he deeply regrets this huge mistake until today. However, he remembers enough to figure out that his cob-Douglas production function for weird looking coffee tables is Q=2K^0.5 L^0.5. Can Ahmad build any weired looking coffee tables without tools? Can Ahmad Completely mechanize the production of weired looking coffee tables? Ahmad currently has 100 units of capital/tools, and in the short run he can neither acquire more tools, nor sell any existing tools. What is Ahmad's short-run production function? If Kapital/tools rents for $100 per unit per4 day, and Labor can be hired for $200 per unit per day, what are Ahmad's fix costs and variable costs? What is the Total cost function? What is Ahmad's average cost function? If Ahmad wants to minimize his Average costs, how many weired looking tables should he produce? What is the long term (meaning: capital/tool level is flexible) cost minimizing amount of labor and capital to produce 50 weired looking chairs.

Explanation / Answer

A. No because when K= 0 ,then Y = L*0 = 0

b. No because when L= 0 ,then Y = K*0 = 0

c. Short run Pf , Y = 2(100)^1/2*L^1/2 = 20L^1/2

d. Fixed Cost = Price of K*K = 100*100 = 10,000

Variable = Price of L*L = 200*L = 200L

Total Cost = 10,000 + 200L

e. 50 = 2K^1/2*L^1/2

Since MPL/MPK = K/L = 100/200 = 1/2

So. 50 = 2*(2)^1/2K

k = 17.68

L = 2*17.68 = 35.36

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